Member Briefing June 5, 2025

Posted By: Harold King Daily Briefing,

Top Story

ISM Services PMI falls to 49.9 in May

Economic activity in the services sector contracted in May, the first time since June 2024, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business. The Services PMI indicated slight contraction at 49.9 percent, below the 50-percent breakeven point. The index has now been in a trend decline over the past year, and not only did the headline composite index slip below 50, designating contraction in the sector, but the details suggest activity is potentially worse than implied by the 49.9 reading.

Of the four metrics that feed into the headline index, two were down (new orders & business activity) and two were up (employment & supplier deliveries). This mix reveals a potential dry-up in coming production and some false-positive from increased lead times. One of the weakest points in this report came from the near-six-point plunge in new orders, driving the index to 46.4, which marks the lowest reading in two and a half years.

Read more at Wells Fargo



ADP: Private Employment Rose by 37,000. Manufacturing Employment Shrunk by 3,000

Employment in the U.S.’ private sector grew in May at the weakest monthly pace since March 2023, according to a report released Wednesday morning by private payroll processor firm ADP, becoming the latest ammunition for President Donald Trump in his campaign for the Federal Reserve to slash interest rates. The 37,000 private sector jobs added last month came far short of consensus economist forecasts of 110,000 new positions, according to Dow Jones data.

Small business employment shrank by 13,000 and manufacturing employment shrank by 3,000, according to ADP. In a post to social media, Trump took the weak report as an opportunity to again insist the Fed “must now LOWER THE RATE,” referring to the notion that the central bank should cut rates to stimulate the economy and labor market. The Labor Department’s May nonfarm payrolls report, the primary yardstick of the U.S. employment picture, will come out Friday at 8:30 a.m. EDT. Economists project the government to report 125,000 monthly job growth and an unemployment rate of 4.2%.

Read more at Forbes


Americans Are Finally Saving Almost What They’re Supposed to for Retirement

Workers are putting away a record share of their income for retirement. The average savings rate in 401(k) plans rose to a record high 14.3% of income in the first three months of this year, according to a Fidelity Investments analysis of the millions of accounts it manages. That is just a shade below the 15% annual savings rate financial advisers often recommend over a four-decade career. Savings rates are increasing even though account balances fell in volatile markets earlier this year. Most are staying the course, said Mike Shamrell, vice president at Fidelity Investments, which released the data Wednesday.

Average 401(k) savings rates have risen from 13.5% in 2020, according to Fidelity, the nation’s largest 401(k) administrator with about 25,000 client companies. Today’s savings rate includes a 4.8% contribution from employers, and the rest from employee contributions. In the first quarter, 17.4% of people with 401(k) accounts at Fidelity increased their savings rate, while 5% decreased. Less than 1% stopped saving altogether. Financial advisers generally recommend that people save about 12% to 15% of their pay annually. Higher earners generally need to save more, since Social Security replaces a smaller percentage of their preretirement income. At Fidelity, baby boomers saved 17.2% on average, while generation X and millennials put away 15.4% and 13.5%, respectively.

Read more at The WSJ


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Policy and Politics

GOP Senators’ Demands Push Megabill Price Tag Up

Republican senators want changes to the GOP tax-and-spending megabill, and their ideas come with price tags that will challenge party leaders’ ability to cobble together a version that can get to President Trump’s desk quickly.   Sen. Josh Hawley (R., Mo.) says the Medicaid cuts go too far for his state, and wants some funding restored, while Sen. Susan Collins (R., Maine) is concerned about the bill’s effects on rural hospitals and low-income families. Sen. Thom Tillis (R., N.C.) wants slower phaseouts of clean-energy tax credits to avoid scuttling private-sector investments that responded to federal incentives. Sens. James Lankford (R., Okla.) and Steve Daines (R., Mont.) want to take some tax cuts that are temporary in the House bill and make them permanent to provide certainty for businesses.

Locking down the votes of those senators and others with similar requests will cost money one way or another, and could further inflame intraparty tension with fiscal hawks. To balance things out, senators could find more offsetting spending cuts, dial back their tax relief or accept larger budget deficits. Each of those options comes with risks, both in finding a majority for the bill in the 53-47 Senate and in avoiding problems in the House, which passed its version 215-214 last month and must approve any changes.

Read more at The WSJ


CBO: House Megabill Will Add $2.4 Trillion To US Debt, $1.4 Trilion Less Than Earlier Version

The nonpartisan Congressional Budget Office on Wednesday released a revised estimate of the cost of President Donald Trump's tax-cut bill passed by the U.S. House of Representatives, concluding it will add $2.4 trillion to the federal government's $36.2 trillion debt. The new assessment comes a day after key Trump ally Elon Musk blasted the bill as a "disgusting abomination," giving fresh support to Republican deficit hawks who have been pushing back against the measure.

An earlier CBO estimate predicted the Republican bill, which passed on May 22 with no Democratic support, would add around $3.8 trillion to Washington's debt over the next decade. The measure, now awaiting action in the Senate, aims to extend Trump's 2017 tax cut law while also achieving steep spending reductions, largely on a healthcare program for the poor. The new CBO estimate takes into account late changes that were made to the bill as Republican leaders steered it to passage. In its May 2023 budget projections for fiscal year 2024, CBO underestimated revenues by 1 percent and outlays by 6 percent. CBO’s projection of the federal budget deficit for 2024 was less than the actual amount by 1.1 percent of GDP.

Read more at Reuters


Wells Fargo Asset Cap Lifted After ‘Fake Accounts’ Scandal

he U.S. Federal Reserve announced on Tuesday that Wells Fargo will no longer have to operate under a $1.95 trillion asset cap the regulator imposed on the bank in 2018 following its long-running sales practices scandal. The Fed said in a statement that the bank had made "substantial progress" in addressing its deficiencies, including improving governance and risk management programs, clearing the way for the central bank to remove the unprecedented growth restriction.

“The Federal Reserve’s decision to lift the asset cap marks a pivotal milestone in our journey to transform Wells Fargo,” Wells Fargo CEO Charlie Scharf said. “We have changed and simplified our business mix, and we have transformed the management team and how we run the company,” he added.  Citi analysts said the “most meaningful benefits of the removal are that WFC can take on more commercial deposits and use more balance sheet to fund trading growth; however, we don't expect immediate tailwinds to loan growth or expense efficiencies.” Citi said that loan growth has been limited less by the asset cap than the uncertain economy that is weighing on loan demand. The brokerage, which has a neutral call on Well Fargo, said most of the removal of the cap has already been priced in.

Read more at Yahoo Finance


Political Headlines


Health and Wellness

Why Employers Are Investing Heavily In Employee Mental Health

In recent years, more and more employers in the U.S. have prioritized mental health supports for employees, using their role as purchasers of mental health benefits to drive change in the system. But the type of support those employees actually end up receiving can make all the difference. On May 22, three analysts from the corporate well-being realm briefed Covering Workplace Mental Health journalism fellows on what a productive strategy for fueling employee mental health well-being looks like. Here are some of their key points from the session:

  • Mental health has become a top priority for employers, with nearly half of the surveyed companies citing it as their top well-being strategy focus.
  • Employers are implementing a wide range of initiatives to support employee mental health, including EAP programs, virtual counseling, caregiver support and flexible leave policies.
  • Promoting a positive mental health culture through leadership engagement, manager training, and peer support programs is crucial for reducing stigma and encouraging utilization of available resources.
  • Employers are recognizing the business case for investing in workplace mental health, as it can improve productivity, retention, and overall organizational performance.
  • Challenges remain around ensuring accessibility and utilization of mental health benefits, as well as addressing the root causes of workplace stress and burnout.

Read more at National Press


Industry News

Trade War Updates


Automakers Race to Find Workaround to China’s Stranglehold on Rare-Earth Magnets

Four major automakers are racing to find workarounds to China’s stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks. Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.

Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed. Moving production to China as a way to get around the export controls on rare-earth magnets could work because the restrictions only cover magnets, not finished parts, the people said. China in April began requiring companies to apply for permission to export magnets made with rare-earth metals, including dysprosium and terbium. The country controls roughly 90% of the world’s supply of these elements, which help magnets to operate at high temperatures. Much of the world’s modern technology, from smartphones to F-35 jet fighters, rely on these magnets.

Read more at The WSJ


GlobalFoundries Commits $16B To Expand New York, Vermont Facilities

GlobalFoundries announced plans Wednesday to invest an additional $3 billion to expand its semiconductor manufacturing and advanced packaging capabilities in Malta, New York, and Essex Junction, Vermont. The funds will go toward research and development initiatives focused on packaging innovation, silicon photonics and new gallium nitride technologies, according to the press release. The money builds upon the company’s previously announced $13 billion investment in the two plants, as well as its upcoming advanced packaging and testing center on its Malta campus.

GlobalFoundries’ new investment addresses the “explosive growth” in AI, as the technology accelerates demand for new semiconductor capabilities and processes to power data centers, communications infrastructure and AI-enabled devices, according to the press release. AI is especially driving demand for GlobalFoundries’ silicon photonics, GaN, and FDX technologies to power data centers, Breen said in a statement. The semiconductor supplier is also collaborating with major companies to reshore production to the U.S. and diversify global supply chains, including Apple, SpaceX, General Motors, AMD, Qualcomm Technologies and NXP.

Read more at Manufacturing Dive


Mortgage Demand Drops For The Third Straight Week, Even As Interest Rates Ease

Mortgage rates fell slightly last week, but that did nothing to spur mortgage demand. Total mortgage application volume dropped 3.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.92% from 6.98%, with points falling to 0.66 from 0.67, including the origination fee, for loans with a 20% down payment. Rates have really moved in a very narrow range for the last two months.

Applications to refinance a home loan, which are most sensitive to weekly rate moves, still declined 4% for the week but were 42% higher than the same week one year ago. Last year at this time, rates were 15 basis points higher, so not a huge difference, but the volumes are so low to begin with that it doesn’t take much to move the needle. Applications for a mortgage to purchase a home fell 4% for the week, but were 18% higher than the same week one year ago. The spring season has been sluggish to say the least, with closed sales still coming in lower than last year, despite mortgage demand now being higher. The main driver of increased purchase demand is simply more supply on the market. Given how much more there is, however, the highest level in five years, sales should be even stronger.

Read more at CNBC


Carrier Invests $1B To Expand Climate Solutions Manufacturing Facilities In The United States

Carrier Global Corporation has announced plans to invest $1 billion to expand its manufacturing operations and innovation capabilities across multiple U.S. locations. The company, which provides intelligent climate and energy solutions, will create 4,000 new jobs in research and development, manufacturing, and field services.    The investment will support the expansion of existing facilities and the construction of a new manufacturing site that will produce highly engineered components for heat pumps and battery assemblies—key products in Carrier's Home Energy Management System (HEMS). The new site and facility upgrades will also advance next-generation research and development, including technologies for liquid cooling systems for data centers and battery-enabled climate solutions.

Carrier’s investment will fund the growth of Carrier Energy, the company’s in-house startup focused on optimizing home energy use and supporting grid flexibility. The investment also includes Carrier’s TechVantage program, which aims to hire 1,000 service technicians and train over 100,000 professionals in climate solutions service and sales over five years to support the installation and servicing of high-performance systems.

Read more at Plant Services


U.S. Automakers Have Invested In More Automation To Improve Productivity And Address Labor Shortages

Automakers in the United States have invested in more automation to improve productivity and address labor shortages. According to the International Federation of Robotics (IFR), total installations of industrial robots in the auto industry increased by 10.7 percent in 2024, reaching 13,700 units in 2024. The machines are primarily used for material handling and machine tending applications in body and paint shops.

America ranks tenth among the world’s most automated manufacturing countries with a robot density of 295 robots per 10,000 employees. The country’s automation is heavily concentrated in the auto industry. Around 40 percent of all new industrial robot installations in 2024 were in the automotive sector. This is followed by the metal and machinery industry with 3,800 units representing a market share of 11 percent. Installations in the U.S. electrical and electronics industry has a market share of 9 percent, with 2,900 units.

Read more at Assembly


Lockheed Draws $1B More for Hypersonics Work

The U.S. Dept. of Defense awarded a $1-billion contract modification to Lockheed Martin Space to proceed with the Conventional Prompt Strike project – a component of the broader hypersonic weapons development that proposes to establish a capability to deliver a precision-guided conventional weapon strike anywhere in the world within one hour. The DoD’s hypersonics strategy covers several programs aiming to develop weapons systems that travel at speeds of Mach 5 or greater, including Long-Range Hypersonic Weapons (LRHW) and Hypersonic Attack Cruise Missiles (HACM), in addition to the CPS project. Each of these weapons would be deployed to strike hardened or time-sensitive targets, engage high-value surface threats, and gain a tactical advantage in contested battlespaces.

CPS capability exists today with nuclear-armed missiles (ICBM), but establishing it also for conventional weapons would be a new advantage to U.S. forces. The modification to the original, 2023 contract tasks Lockheed with program management, engineering development, systems integration, long-lead material sourcing, and special tooling and equipment acquisition, in support of missile and launching platform production for Conventional Prompt Strike.

Read more at American Machinist


Nvidia Tops Microsoft, Regains Most Valuable Company Title For First Time Since January

Nvidia  passed Microsoft in market cap on Tuesday, once again becoming the most valuable publicly traded company in the world. Shares of the artificial intelligence chipmaker rose about 3% on Tuesday to $141.40, and the stock has surged nearly 24% over the past month as Nvidia’s growth has persisted even through export control and tariff concerns. The company now has a $3.45 trillion market cap. Microsoft closed Tuesday with a $3.44 trillion market cap.

Nvidia has been trading places with Apple and Microsoft at the top of the market cap ranks since last June. The last time Nvidia was the most-valuable company was on Jan. 24. Nvidia and other chip names boosted markets Tuesday. Broadcom rose 3%, and Micron Technology gained 4%. The VanEck Semiconductor ETF, which tracks a basket of chip stocks, gained 2. Nvidia’s growth has been fueled by its AI chips, which are used by companies including OpenAI to develop software such as ChatGPT. Companies including Microsoft, Meta, Google, Amazon, Oracle and xAI have been purchasing Nvidia’s AI accelerators in massive quantities to build ever-larger clusters of computers for advanced AI work.

Read more at CNBC


GE Extends Drone Power Partnership

GE Aerospace is forming a partnership with Kratos Defense & Security Solutions to continue their collaboration in propulsion technologies for the new drone weapons (unmanned aerial systems, UAS) and “collaborative combat aircraft” (CCA.) Similar to UAS (i.e., drones), CCAs are AI-powered vehicles that fly autonomously or in small groups and perform missions like air-to-air and air-to-ground combat, electronic warfare, and intelligence gathering.

The agreement provides the framework for the two companies to develop, manufacture, test, and field the GEK800 engine, and collaborate on other low-cost, expendable turbofan engines. That may refer to the GEK1500, another engine under development to support UAS, CCA, and similar applications, as affordable mass propulsion technologies for U.S. Dept. of Defense programs. “The formalization of this teaming agreement and initiation of development of these new engines mark another step forward in our dedication to providing affordable, adaptable, high-performance propulsion systems for the future force,” stated Amy Gowder, president and CEO of GE Aerospace Defense & Systems.

Watch at American Machinist


Burning Cargo Ship Carrying 3,000 Vehicles Abandoned Off Alaska

The crew of a cargo ship carrying around 3,000 vehicles, including 800 electric vehicles, abandoned it off the coast of Alaska after a fire broke out onboard, its operator Zodiac Maritime said on Wednesday. The 22 crew members were safely evacuated from the ship after they failed to put out the fire, Zodiac said as it focuses on salvaging the vessel. The vessel, Morning Midas, was located 300 miles (482.8 km) southwest of Adak in Alaska, the Coast Guard said on its X account.

Smoke was initially seen rising from a deck loaded with EVs, the company said. It is not clear what brand of vehicles the ship was carrying. EV-related fires on ships are challenging to extinguish due to the heat generated and risk of reignition, which could persist for days. The Coast Guard said aircrew and a cutter ship have been sent to assist with the situation and three vessels were already on the scene.

Read more at Reuters